Third-seeded Sharapova lost 3-6, 6-4, 6-1 to Dominika Cibulkova on Monday, struggling with her serve in the second and third sets and making 45 unforced errors as she tried to claw her way back.
Her serve started to backfire from the eighth game, when she was broken at love while trying to serve out the first set.
During a run of four breaks against her, Sharapova won only three points on her own serve and fell 5-0 behind in the second set.
The four-time major winner rallied to win four straight games before Cibulkova held to level the match. After taking an off-court medical time out after the second set for a hip strain, she was broken immediately and had seven double-faults in the third set.
Sharapova was two tournaments into a comeback from a prolonged layoff with a right shoulder injury, and said her run to the fourth round was a positive sign because she was healthy and back on tour.
"I have to look at the positives and see where I have come from in four or five months. I haven't played a lot of tennis in those six months," said Sharapova, who won the Australian title in 2008 and lost two other finals.
"So I certainly would have loved to play a little bit more before playing a Grand Slam, but this is the chance that I was given."
Top-ranked Williams, a five-time Australian Open champion, was knocked out in a three-set loss to 14th-seeded Ana Ivanovic on Sunday, and later revealed she had a back problem that had her considering withdrawing from the tournament.
The absence of two of the biggest stars in women's tennis opens up the draw for two-time defending champion Victoria Azarenka, who was playing No. 13-seeded Sloane Stephens later Monday.
Sharapova made it hard for herself in Australia, having difficulty closing out her second- and third-round matches. She needed almost 3 1/2 hours to beat Karin Knapp in searing heat the second round — playing 50 minutes between her first and final match points. She said she couldn't use the heat wave as an excuse for her loss, and added that the hip strain wasn't anything out of the ordinary for a tennis player.
Cibulkova had spent just over 3 1/2 hours on court in her first three wins, including a 6-1, 6-0 win over No. 16 Carla Suarez Navarro in the third round.
The pair hadn't played since Sharapova's quarterfinal win at Wimbledon in 2011. Now they're evenly split in six head-to-heads, but Cibulkova has won two of their three matches at the majors with her win Monday and her quarterfinal victory at the 2009 French Open.
Cibulkova raced to a 5-0 lead in the second set before tightening up and letting Sharapova back into the match. She was more steady in the third, when she didn't even face a break point.
"I was never doubting myself," the No. 20-seeded Cibulkova said, adding that Ivanovic's win over Williams the previous day had been motivational but not her main inspiration against Sharapova.
"It was a great match for Ana. But this was a different story. I already beat Maria before and I beat her" at a major.Suggest a correction